The sluggish Hong Kong economy during the COVID-19 pandemic has created various business issues for local SMEs, but a huge gap exists between their level of concern and the suitable insurance coverage that they have got, according to new research by QBE Insurance.
Nearly three-quarters (71%) of SMEs polled in the QBE study say they experienced at least one business issue in the past 12 months, up from 66% in 2019. But while 90% of SMEs have purchased some form of insurance protection to cope with such issues, the majority do not have the appropriate cover to address their specific protection needs.
For example, while 65% of SMEs cite “loss due to equipment breakdown” as one of their top concerns, with 31% being highly concerned, only 24% have bought the appropriate insurance. As well, among the 61% SMEs that are concerned about “damage to business property”, only 31% have relevant coverage. Elsewhere, while 59% of SMEs are concerned about “loss of key staff”, only 10% have relevant protection.
The research was commissioned by QBE Hong Kong, part of QBE Insurance Group, and drew on a survey of 410 SMEs in late 2020. It takes the pulse of local SMEs and shows the latest thinking on the economy, COVID-19 pandemic, insurance and other issues.
“The findings are significant because there are about 340,000 SMEs in Hong Kong, employing about 45% of Hong Kong’s workforce in the private sector,” said Ms Lei Yu, CEO North Asia and regional distribution head. “It’s essential they get the right protection to navigate these risks.”
The study also shows that around a quarter (23%) of small-to-medium-sized enterprises (SMEs) in Hong Kong expect the local economy to improve over the next 12 months.
As the pandemic persists, 56% of respondents expect the Hong Kong economy to worsen over the next 12 months, with 45% expecting a worse business environment. This includes deteriorating investor and consumer confidence (cited by 70% of SMEs) and reduction in tourism (53%). Decreasing demand from domestic (49%) and overseas customers (39%, up from 23% last year) adds to the difficulties.
The Hong Kong economy is estimated to have shown aGDP decline in 2020 of 6.1%.
In the face of worsening economic conditions, most Hong Kong SMEs (70% vs 65% in 2019) are looking to implement more cost controls or to downsizing or streamlining their organisational structure (40% vs 32% in 2019). In addition, there’s a reluctance among SMEs to expand overseas, while more than half (53%) of those already internationalised are considering scaling down their overseas presence.
“Clearly, local SMEs are under a lot of cost pressure and trying to streamline their operations as effectively as possible to withstand the headwinds. It’s therefore even more paramount that the money they invest on protecting their business is money well spent,” said Ms Lei.